OM Property Management Ltd v Burr [2012] UKUT 2 (LC)

This case provides further clarification from the LVT of the time limits for demanding residential service charges under section 20B of the Landlord and Tenant Act 1985.

Mr Burr was the leaseholder on an estate managed by OM Property Management Limited. The estate included a communal swimming pool that was heated by gas and OM Property paid the gas bills. OM Property was advised by the developer of the estate that the gas was supplied by EDF Energy.

From 2001 to 2007 OM Property received bills from EDF and paid them accordingly. However, in November of 2007, Total Gas and Power informed OM Property that they had been supplying gas to the estate over this period and that EDF had undercharged them by £135,337.

OM Property recovered their payments from EDF and Total discounted the sums it was claiming by 20%. In April 2008, OM Property included the £100,289 that Total was now claiming in their service charge demands from leaseholders.

Mr Burr claimed that the proper amount of costs had not been included in the service charge demands at the proper time. OM Property claimed that Mr Burr was liable under the terms of the lease and the costs were incurred when they were invoiced by Total in November 2007.

The case was referred to the LVT who stated the issue in question was one of timing – when were the costs to Total incurred?

Under section 20B, the clock starts ticking on the day costs are incurred and a demand for payment must be served on the tenant within 18 months. The only exception is if, on the day costs are incurred, the tenant is notified in writing of the costs that he will subsequently have to pay.

Section 20B was intended to protect tenants from being unexpectedly presented with a demand for historic costs in the form of a service charge. The LVT decided in favour of Mr Burr; the costs were incurred when the gas was supplied and the demand fell outside the 18 month time limit.

OM Property appealed and the meaning of costs incurred in section 20B was re-examined by the Upper Tribunal.

The Upper Tribunal found in favour of OM Property and stated that costs were incurred on the presentation of an invoice or on payment being made. A note of caution was sounded that the facts of any individual case will need to be considered and the section 20B time limits cannot be circumvented by delaying to pay an invoice.

Perhaps the moral of this decision is to err on the side of caution and treat the date of the invoice as the date from which the 18 month clock begins to tick and diarise accordingly! Regard should also be had to the decision in London Borough of Brent v Shulem B Association Ltd featured in our last eBulletin as to the content of your section 20B notices.